Renting in the UK has become more expensive, with private rental prices rising by 5.5 percent in the year to August. This is compared to 5.3 percent in the previous month of July. The Office of National Statistics (ONS) data recorded the rise in Wales at 6.5 percent, followed by Scotland at 6 percent and England at 5.4 percent. London had the highest annual percentage change, while the north-east and the south-west of the country saw the lowest.
The high cost of borrowing, as a result of the Bank of England raising interest rates, has had a significant impact on homeowners. Many are struggling to make their increased mortgage payments, leading to fewer people buying property and more turning to renting. This increased demand for rental properties has caused prices to spike.
The Bank of England is expected to make an announcement regarding the bank rate, which currently stands at 5.25 percent. Should they decide to raise the rate to 5.5 percent or higher, it will bring relief to homeowners but may further impact the rental market. Renters in England, excluding London, have already seen a rental increase of 5.2 percent.
The Royal Institution of Chartered Surveyors predicts that rental prices will continue to increase over the next three months. The lettings market has seen a rise in tenant demand, while landlords are leaving the sector due to high borrowing costs. This has resulted in a mismatch between demand and supply.
Estate agents Hamptons report that nearly 70 percent of landlords have a mortgage or some form of borrowing. The agency expects the direction of rents to be primarily influenced by where the interest rate settles. The government’s goal is to halve inflation by the end of the year and bring it down to around 5 percent by the end of 2023.